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I’d bet that you hate it when a client doesn’t value or appreciate your time, right? Time wasters, people that bleed you for your knowledge and advice, procrastinators – there’s lots of examples of clients that don’t value their broker’s time. But there’s something you can do about it.

A broker told me a really interesting story this week. This broker was doing a loan for his cousin. Once the loan settled, his cousin approached him and asked “what’s your fee? How much do I owe you? I’m really happy with your work and I want to pay you.” Of course the broker said that there’s no fee because he earns a commission. The cousin insisted and so did the broker. No fee was paid. About 6 months later the broker was doing a second transaction for the cousin. This time around the cousin became very demanding and largely un-appreciating of the broker’s time. I wonder if this would have happened if the broker had have charged a fee in the beginning? Probably not.

I believe that fees are a necessity in business if you want your clients to truly value your service. Mortgage broking has evolved into much more than just comparing rates and filling out forms. Without a client having to dip into their pocket, they really just don’t and won’t truly value your time and advice partly because you obviously don’t (otherwise you would charge a fee). So my advice to you is design a valuable service that you can charge a fee for and try and sell it to every client. Maybe your basic service can still be at no charge but if they want the value adding stuff, they need to pay. If you are not confident, set the fee low (but not too low) and then raise it as your confidence grows. The more you charge, the more value the clients will see. And ironically the more referrals you’ll get too.

The clients that take up a fee-based service will almost always be more loyal and more profitable (and less rate sensitive). The clients that don’t take up the service probably won’t be good clients anyway. Introducing a fee will allow clients to essentially “self-select” i.e. do something that then tells you if they will be good, loyal, long-term clients or not. You then know which clients to invest time into.

The additional revenue is good but not really the main reason. The predominant reason for charging a fee in my opinion is to attract clients that truly value your advice and relationship. A great broker can make their clients wealthy and we need to teach our clients to value that (and most importantly, value it ourselves).

Any questions or comments email me: stuart at brokerrevolution dot com dot au.

Comments:

Dave Evans wrote: Then the $64,000 question is – how much should a broker charge? I agree with your article. Since is moved into broking (my own company) from mobile lending from a bank – I visit people who just want info for free and how I should structure my loans and then they just go back to their bank, and I waste $50 in petrol and my time. So how much is acceptable to charge?

Stuart’s response: Hi Dave, thanks for your question – it’s a good one. I think you have a few options. You could charge a commitment fee (say $200-$700) which is payable for you to come and see clients and provide credit advice. Perhaps if they settle a loan within 3-6 months of you seeing them you might offer a full or partial refund of the fee? This will be a good “qualifier” – to ensure they are serious and appreciate your time/advice. In addition to this, you might charge an addition fee for more complex advice (i.e. advice that related to property invest/strategy for example – i.e. the value added stuff that us brokers usually talk to clients about that isn’t directly related to loans but helps the client make smart decisions and build wealth). You might provide some cash projections (from some property software) and RP Data reports, etc. Some brokers charge $300 to $800 for this service. You are then positioning yourself as more than just a mortgage broker. I don’t think the size of the fee matters that much… a few hundred dollars will be enough to force the client to appreciate your time/value. Of course, just make sure you are suitably qualified and/or experienced and have true and honest value to share with clients.

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Turnover is vanity, profit is sanity, cash is reality!

Posted by Jan06, 2015 Comments Comments Off
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This is the quickest lesson in business: Turnover is vanity, profit is sanity, cash is reality!

I find our industry is too obsessed with lodgements and settlements… that’s all vanity.

Things like lodgements, # of new leads, # of client meetings, hours worked per week are all vanity. That is, lots of brokers like to talk about how much they lodged, how busy they are and how many hours they work but it’s really not always that meaningful or important.

For example, what about if I pay large referral fees (commission splits)? Am I really making any profit after I account for the amount of time it takes to write the deal? If it takes many months and hours of work to get refinances to settle then are you really making money? Is my average loan size high enough to compensate me for the hours I work? There are lots of businesses out there with millions of dollars in turnover that are making very little profit, if any! What the point of that?

The amount of hours it takes to win a client and settle the deal is sanity. You get some deals where a client calls up and needs to borrow $1m because they bought a property on the weekend on a 30 day settlement – that is highly profitable! Perfect. Compare that to a client that is a serial pest, asks millions of questions and is all over the place. No one’s making any money there. That’s insanity. Profit is sanity because without it, you don’t survive.

Cash is the amount of money left in the bank at the end of the month after paying for all expenses and that’s reality. Who cares if you have awesome lodgements and profitable clients if you always finish the month without any money in this bank?!?! Cash is the lifeline of any business.

Hopefully you will sit down and do some business planning in January to plan out your year. When you do this you need to think very carefully about this formula: turnover is vanity, profit is sanity, cash is reality. Specifically, you need to define and focus on a profitable niche target client/market and then develop a proven sales system that is designed perfectly for your target market. This will hopefully maximise your lodgements whilst minimise your time.  Systemise as much as possible. Do this and you are a long way to maximising your cash in the bank! Good luck.

P.S. In a few months I plan to launch a new online training course that gives you an effective annual review and referral generation system… so keep an eye out for it.

 

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Give no more than 3 reasons for your recommendation!

Posted by Nov28, 2014 Comments Comments Off
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When making a loan recommendation to a client, how many reason do you give to justify that recommendation? You might cite the low interest rate, the features of the professional package, the banks service, turnaround times, borrowing capacity, free valuations, fee waivers and special offers and the list goes on. But new research suggests you could be doing yourself (and your client) a massive disservice.

In Robert Cialdini’s new book, The Small BIG he cites research that suggests the more reasons you give to why someone should do business with you or why you recommend a certain lender/product, the weaker the overall proposition. This might seem counter intuitive but the theory is that if I give 10 reasons for why a client needs to use Westpac it is difficult for the client to assess which reasons are the most important and which reasons are just ‘bells and whistles’. As such, the weaker reasons detract from the stronger reasons (i.e. the strong reasons don’t seem that strong anymore).

Let me give you an example. Assume my client David needs to borrow a certain amount, say $700k and whilst its clear he can clearly afford it, due to lenders credit policies there is only one lender that will prove a loan amount of $700k and that is CBA. So I tell David that I recommend CBA because they will give him a 1% discount in the pro pack, their service is good, they have an offset and they will approve the required loan amount. If you were David, which reason do you think is the most important – research says he’s likely to think all four reasons are equally as important. However, there really is only one reason why I recommended CBA. Adding in the CBA’s service is good for example weakens my recommendation.

A far stronger recommendation would be “CBA is the only lender than will approve a loan of $700k so we have to use them”. Doing so means that David will probably ignore the lower rate offer from Suncorp because he knows it won’t approve the required loan amount.

Therefore, think about the reasons you are recommending a lender/product and only mention the important reasons – no more than 3 reasons research says. If you have “10 reasons why you should use us” on your website, shave the reasons down to the top 3.

Of course, make sure the reasons are important to the client – mentioning that the lender has an offset will not help if an offset isn’t important to the client.

 

 

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Learn from my personal business coach

Posted by Nov03, 2014 Comments Comments Off
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I know you’re busy, but if you can, do yourself a favor and watch this complimentary video series about getting your business model right by my business coach, Andrew Roberts.

Click here to watch this training for free. I wouldn’t recommend it if I didn’t think it was awesome.

I worked with Andrew for a couple of years and he helped greatly improve my mortgage business and more importantly, my life. He’s an experience entrepreneur and “does” as well as “teaches”. And that was really important to me when deciding to work with him. He speaks from experience, not a text book.

He has worked with many other brokers and some of the top business owners around Australia.

This video will help you learn that in order to be successful, you need to be passionate – but more importantly – you need to have a great business model.

He teaches you that your model is everything. He will also show you that with some tweaks to your model, you have the ability to create a much more profitable broker business in a short time frame.

Andrew has built and sold two of his own companies, and I know you will get a lot from this complimentary video training.

Again – the link – click here.

Have a great week!

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Every client you deal with will teach you a lesson. It will be a lesson about something you did right or something you did wrong but the lesson is there if you are open to receiving it. Some brokers spend their time blaming clients and prospects. Things like “that client just didn’t get it, that client didn’t value my time, that client used me and ended up going direct to the lender” and the blame game goes on. However, it’s not the client’s fault. You can’t control the client but you can control yourself and your reaction to clients. Ask yourself if it’s something you have done:

  • If you booked a meeting with a client without qualifying them properly over the phone, is it their fault they wasted your time? You chose to be undisciplined and not follow your system.
  • If your gut told you that this prospect is a time waster and it eventually turns out just how you expected it, is it the client’s fault? You chose to ignore your better judgement.
  • If you discount or waive your standard fee just to win the business, is it the clients fault for not valuing your advice/service?  You chose to undervalue yourself.
  • If you meet a new prospect and win their business quickly and simply, is it because of the client? Or did you perfect your sales process? You chose to be the best you could be.

I have chosen to try and build a successful business. I have not chosen to always be right.

 

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